Anticipated Impact on Veterans Health Care: As in the general population, there is no clear standard of care within Veterans Affairs Medical Centers for treating posttraumatic stress disorder (PTSD) among individuals with severe forms of mental illness. This is a considerable issue because trauma, PTSD, and psychiatric comorbidity are particularly common among Veterans and such comorbidity clearly exacerbates the overall course and severity of mental illness. This study is significant in that it proposes to establish the efficacy of a frontline intervention for PTSD, Prolonged Exposure, in Veterans treated within the VA healthcare system. In this regard, data from this project will be used to establish a clear, and much needed, clinical course of action for severely mentally ill Veterans suffering from PTSD. Background: Rates of trauma and PTSD are higher among individuals with severe mental illness (SMI; i.e., bipolar disorder, schizophrenia) relative to the general population. Trauma, particularly sexual victimization, and PTSD are also strongly correlated with psychiatric difficulties, decreased quality of life, and increased service use in this population. Despite the high rate of PTSD, and its clear negative impact on functioning among individuals with SMI, there are few empirical data on how to effectively treat trauma related symptoms in this patient population. This is due in large part to the historical exclusion of individuals with SMI from PTSD clinical trials. Within clinical settings as well, however, clinicians are reluctant to treat trauma and PTSD among their patients with SMI for fear of exacerbating their primary symptoms. As such, most individuals with SMI do not participate in trauma/PTSD research, are not treated for their trauma/PTSD symptoms within the public sector settings where they are cared for, and as such, continue to suffer from PTSD related symptoms and distress. This issue is particularly salient for Veterans who typically suffer from high rates of trauma exposure, PTSD, and psychiatric comorbidity relative to the general population. Objectives: The primary objectives of this study are to compare Prolonged Exposure for PTSD (PE) plus treatment as usual (TAU) relative to TAU alone across relevant health services outcomes such as a) clinical symptoms of PTSD; b) indices of quality of life and social adjustment; c) process outcomes, such as treatment credibility, satisfaction with services, therapeutic alliance, and treatment adherence; and d) cost indices. Some additional objectives are to a) determine the impact of PE+TAU on the primary symptoms of severe mental illness (i.e., psychosis, unipolar and/or bipolar depressive symptoms) relative to TAU alone and b) to determine if clinical, quality of life, and process variables (i.e., health services variables) vary by rural/urban living status, race, gender, and/ o primary diagnosis of severe mental illness. Collectively, these data will establish a clear standard of care for Veterans with PTSD and SMI who are treated within VA healthcare settings. Method: To achieve the above objectives, we will conduct a randomized controlled trial comparing PE+TAU to TAU alone across critical health services outcomes. Specifically, we will enroll 156 (n=78 per group) ethnically diverse male and female Veterans with PTSD and a diagnosis of SMI (i.e., a psychotic disorder, bipolar disorder, or severe depression) from the Charleston VA catchment area. Recruitment and consent will take place at the Charleston VA or affiliated community-based outpatient clinics (CBOCs). Veterans will be randomized to PE+TAU or TAU alone and evaluated at post, 3, and 6 months. Veterans in the PE+TAU condition will receive12 sessions of PE at the Charleston VA in addition to the regular standard of care for Veterans with SMI (TAU; i.e., case management services, psychotropic medication management). Participants will be > 21 with PTSD and SMI. Veterans with a recent history of psychiatric hospitalization or suicidal intent and/or who have active substance abuse/dependence will be excluded from participation.